Sunday, November 1, 2009

Why We're Expecting November and December to Fly Like a Piano

Sometimes a little perspective can be had from poking around.  Weekend articles are excellent for financial news because very often big things happen on weekends in the hopes that it will be "old news" and have made way for something else by the time the open bell rings on Monday morning.

For example:

CIT Group Files for Ch 11 Bankruptcy (Finally)

Not that this is REALLY new news for anyone - their bond/equity deal was a last ditch effort with a low probability of success at best.  But who knows, maybe the 5th largest bankruptcy filing in US history by assets is the first of a renewed trend.

I've also been reading something pretty hilarious as I poked around the usual MS financial sites like Bloomburg, CNBC, the Globe and Mail, et al.

I see many mentions of historical performance - remember, coming into October, most mainstream market pundits were citing the fact that "October is historically a bad month for the market".  Now, on the other hand, the perspective has swung drastically.  "November and December historically provide superior gains" and such other nonsense is being put out there against the back drop that the market is suffering a "temporary correction".

Now, I'll cover this briefly - the contrarian in me is laughing out loud, thinking "we're in the biggest bear market in history, so why shouldn't October - historically a HORRIBLE month - turn out not-so-bad, and why shouldn't November-December proffer huge declines in the markets?"

Our forecast still holds tangible and strong.  A look at the long-term chart of the S&P gives us a perfect long-term channel correction in a continued bear market.  The target price for the index is below 200 points, which may sound outrageous now, but as time unfolds will most likely prove truer, sooner.

Hold on To your Hats, Folks!
We'll catch up later in the week with you, diligent readers.  If you are not in cash we hold our recommendation of making that move ASAP.  The more of it you have in your hand the better.




  1. Deflationists believe that. Marc faber thinks 20%. And then there are inflationists.

    Govt has really few options:
    1. let inflation eat the debt - but means everyone is poor and the era of america is gone. So this is not possible
    2. Deep deflation - in this era where govt has a great ability to print cash. any deep deflation will be politically suicidal.
    3. Low deflation. Rich can hang to their cash. middle class & poor will be able to survive with govt bailouts. very poor will survive like they have survived for ever. And low deflation will make the rich a little richer. So seems Japan's lost decade is the best scenario.

    Markets may crash but not that much this year. dow should touch 2k 1-2 times within next two years.

  2. The government essentially has zero options in terms of full market force. The total amount of debt and obligations worldwide that exist in USD terms is over 25x the current Federal deficit! And most of the tools, other than the monetization of debt, are only monetary-base related and cannot force lenders to lend and borrowers to take on more debt. Essentially, they are at a stalemate at best.

    Governments will always print money once they have given themselves the authority to, if only to service a political agenda and buy votes. However, there are trillions of dollars of US debt that are going to be wiped out very quickly via bankruptcies that will cause a sharp and drastic decrease in total money (Money Supply + Total Credit).

    Once this has been liquidated we are anticipating high inflation within the next several years following the final market bottom. At this point we recommend moving a large portion of cash savings via actual cash and short term treasuries into precious metals, which should experience another long term bull market similar to/greater than the 2000-2008 bull market.